Reviewing the Energy Infrastructure Business and Growth Opportunities



KEY POINTS
  • Aspen Aerogels has a 5-10% share of the energy infrastructure market with more than a billion dollar installed base. Management believes it can sustain low double-digit revenue growth rates in this segment long-term even if the market moves sideways over the next 5 to 10 years through market share gains driven by its differentiated aerogel technology.
  • The company views the hydrogen economy as a future growth engine with potential applications for its aerogel technology, specifically related to liquid hydrogen. The company expects to join a consortium of household names with deep expertise around storage and transportation of liquid hydrogen and plans to leverage its expertise in thermal management and passive fire protection for liquid hydrogen applications.
  • Management believes it can double revenue every 24 months, reaching $450 million by 2025 at a 40%+ CAGR between 2021 and 2025. By the end of 2023, it targets $225 million in revenue and a 30% gross margin.
  • The 2023 revenue target of $225 million is comprised of two parts: $75 million related to a large North American automotive OEM contract for thermal barriers and $150 million from the energy infrastructure business. The 2023 target is achievable with existing plant assets and would not require additional capex.
  • The subsequent doublings from 2023 to 2025 and beyond would require additional capex of approximately $0.65 per dollar of revenue capacity. The company expects to have new capacity online by the end of 2023.
  • Our prior content on ASPN can be accessed HERE.

Water Tower Research is a shareholder communication and engagement platform powered by senior industry experts with significant Wall Street experience. We create, deliver, and maintain the information flow required to build and preserve relationships with every stakeholder and potential investor. Our foundation is built on Wall Street veterans using open digital distribution strategies that are accessible by everyone. "Research for the Other 99% ™ " opens the door to reach a much broader and diverse set of investors while helping to strengthen overall communications, transparency, and engagement.

OUR INSIGHTS

The Opportunities

Aspen Aerogels has created a modified version of its aerogel insulation materials branded PyroThin™, which is a highly effective thermal barrier used to mitigate thermal runaway in lithium-ion batteries in electric vehicles (EVs). The company estimates this market could be a $30 billion opportunity over the 2020 to 2030 period. Second, the company is developing a battery material technology that can meaningfully improve the performance of lithium-ion batteries, with the potential to be a $37 billion market over the same period. At its core, this product expansion is creating a significant pivot for the company by enabling them to participate in the rapidly growing EV market.

The Obstacles

Although the potential revenue from the initial customer for PyroThin™ thermal barriers is significant, Aspen will likely need to expand its customer base in this market to reduce its reliance on the success of a single OEM in the EV market. In addition, given the market size and opportunity, competitive technologies might evolve and increase competitive pressure in the market. Note, also, that if Aspen successfully executes its strategic plan, it will need to expand annual capacity beyond the ~$200 million available in its East Providence, Rhode Island manufacturing facility.

Aspen Aerogels has a 5-10% share of the energy infrastructure market with more than a billion dollar installed base. Management believes it can sustain low double-digit revenue growth rates in this segment long-term even if the market moves sideways over the next 5 to 10 years through market share gains driven by its differentiated aerogel technology.

EXECUTIVE DISCUSSION

Executive in Focus: Donald R. Young has been President, Chief Executive Officer, and a member of the board of directors since November 2001. Prior to joining Aspen Aerogels, Mr. Young worked in the United States and abroad in a broad range of senior operating roles for Cabot Corporation, a leading global specialty chemical company. Prior to Cabot Corporation, Mr. Young worked in the investment business at Fidelity Management & Research. Mr. Young holds a BA from Harvard College and an MBA from Harvard Business School.

Shawn Severson: Hello, thank you for joining us today. My name is Shawn Severson, Head of ClimateTech & Sustainable Investing at Water Tower Research. With us today we have Don Young, CEO of Aspen Aerogels. We’re going to be addressing the energy infrastructure business. It has an installed base of over a billion dollars and has been a big part of the company’s history and will continue to be so in the future as well...

DISCLOSURES

Water Tower Research (“WTR”) is a professional publisher of investment research reports on public companies and, to a lesser extent, private firms (“the Companies”). WTR provides investor-focused content and digital distribution strategies designed to help companies communicate with investors.

WTR is not a registered investment adviser or a broker/dealer nor does WTR provide investment banking services. WTR operates as an exempt investment adviser under the so called “publishers’ exemption” from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940. WTR does not provide investment ratings / recommendations or price targets on the companies it reports on. Readers are advised that the research reports are published and provided solely for informational purposes and should not be construed as an offer to sell or the solicitation of an offer to buy securities or the rendering of investment advice. The information p...